Fraudulent Concealment

Knowledge of Injury Governs a Statute of Limitations, not Knowledge of a Claim

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Jeffrey Mandalis (“Mandalis”) sued his former attorneys, David Wentzel and Scott Blake (the “Defendants”), claiming they negligently and fraudulently misrepresented the terms of a settlement agreement in a dispute between several members of Mandalis’ family concerning ownership of certain assets.  He also alleged that the Defendants failed to disclose their potentially conflicting representation of his aunt in the same matter, and that they did not inform him when they mediated the family dispute.  Further, allegedly without Mandalis’ knowledge, Blake initialed a settlement term sheet that included all of Mandalis’ rights and claims.  When Mandalis confronted the Defendants, they supposedly misrepresented the nature of the settlement, saying some of his relatives had agreed to settle only as to their interests, and that he would receive his share of the assets later.

Subsequent mediations were inconclusive, so the Defendants asked Mandalis to agree to a binding mediation- arbitration on October 13, 2013.  On October 24, 2013, the Defendants finally informed Mandalis that he should seek separate counsel.  Mandalis did so within three days, but alleged that the Defendants continued to mislead him as to his interest in the family assets until eight days before the November 27, 2013 closing date.  Despite all, Mandalis attended the closing and signed the closing documents for fear that that further dispute would diminish his share of the assets.  He filed his initial complaint in December 2015.  The Defendants moved to dismiss his suit as untimely per the two-year statute of limitations and for failure to allege sufficient facts to support his causes of action.  The trial court granted the motion.  Mandalis moved to reconsider, and appealed when his motion was denied.

The First District affirmed, stating that statutes of limitations do “not require that the injured party have actual knowledge of the alleged malpractice.”  Id. at ¶ 43.  Rather, “knowledge that an injury has been wrongfully caused does not mean knowledge of a specific defendant’s negligent conduct or knowledge of the existence of a cause of action.”  Id.  The First District highlighted that “there can be no doubt that the plaintiff actually knew of his injury in March 2013, such that the filing of his complaint against the defendants in December 2015, was barred by the two-year statute of limitations.”  Id. at ¶ 47.  It clarified that Mandalis “was not only in possession of sufficient information about his injury to be placed on inquiry to determine whether actionable conduct was involved, but in fact had actual knowledge of both the injury and the cause of that injury in March 2013.”  Id.   Nevertheless, it went on, “[i]f the plaintiff did not actually know of his injury after the March mediation settlement, in the very least, he certainly should have known of it after the entry of the October 13, 2013, binding arbitration award enforcing that settlement.”  Id. at ¶ 48.  Mandalis countered that, even if he was injured in October 2013, the Defendants tolled the statute of limitations by fraudulently concealing their misconduct.  In particular, he claimed the Defendants reassured him that his stated goals remained viable.  The First District rejected this argument too.  “Contrary to the plaintiff’s position,” it explained, “he nowhere alleged that the defendants failed to disclose any material facts to him.”  Id. at ¶ 56.  It also pointed out that “the plaintiff admitted that he subsequently participated in the binding arbitration knowing full well that the arbitration award would enforce the terms of that term sheet.”  Id.

Mandalis v. Wentzel, 2019 IL App (1st) 180455-U, opinion corrected and superseded, 2019 IL App (1st) 18-0455-U

(This is for informational purposes and is not legal advice.)

 

Neuman v. Gaffney, 2018 IL App (2d) 180184-U

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In September 1997, a Federal District Court ruled partially in favor of a class of plaintiffs against the State of Illinois for hiring discrimination, although the ruling did not address back pay or other pay relief.  In April 1999, attorney John Gaffney (“Gaffney”) filed a putative class action against the State of Illinois for back pay on behalf of John Mittvick (“Mittvick”) and Edward Urban as plaintiffs and class representatives.  The State moved to dismiss without prejudice, asserting the plaintiffs had failed to timely file charges of discrimination with the Equal Employment Opportunity Commission.  Before that motion could be granted, Gaffney filed his own motion to dismiss without prejudice, which was granted.  Gaffney notified his clients of this by letter, telling them he could no longer represent them and that they should join another class action on this matter already in progress.

Nearly sixteen years later, Robert Neuman (“Neuman”) filed a petition to intervene in the 1999 case, having supposedly just learned of it.  He claimed that he was an absent class member in the 1997 and 1999 cases, and that the 1999 case had not been validly dismissed.  The District Court dismissed Neuman’s petition, holding that dismissal of the 1999 case was valid.  Neuman appealed, but lost when the Seventh Circuit held that he “was already aware of a possible case in 2001 and that a diligent person would have investigated.”  Id. at ¶9.  Neuman then sued Gaffney for legal malpractice, alleging Gaffney had breached his fiduciary duty to notify unknown and unnamed absent class members prior to dismissal of the 1999 suit.  Gaffney successfully moved to dismiss because the six-year statute of repose for legal malpractice claims in Illinois had already lapsed.

On appeal, Neuman argued that the statute of repose should not have been applied because Gaffney had fraudulently concealed important information like the fact that the 1999 case had been voluntarily dismissed, which caused Mittvick not to pursue it further. This alleged concealment, he argued, would toll the statute of repose.  However, the appellate court held that whether or not Gaffney specified to Mittvick that his case had been dismissed voluntarily made no difference.  After reviewing Gaffney’s letter to Mittvick, the Court declared, “there is no indication that he attempted to conceal anything relevant from Mittvick.  He told Mittvick that the complaint had been dismissed and that Mittvick would have to seek a new attorney going forward.”  Id. at ¶22.  Despite Neuman’s insistence that Gaffney’s letter contained misrepresentations, the Court held that “such misrepresentations, even fraudulent ones, are not equivalent to acts of fraudulent concealment.”  Id.

Neuman v. Gaffney, 2018 IL App (2d) 180184-U

(This is for informational purposes and is not legal advice.)

Barefoot Architect , Inc. v. Sabo & Zahn, 2017 IL App (1st) 162616-U

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice claim on statute of limitations grounds and a breach of fiduciary duty claim resulting from a bankruptcy case where the plaintiff had hired attorneys other than the defendants to represent in those proceedings. The court held that, ordinarily, a cause of action for malpractice accrues when a court enters an adverse judgment against a malpractice plaintiff. Here, the statute of limitations had run even using the date the appellate court entered an adverse judgment against the plaintiff. The court held that the lawyers’ statements that the court had erred did not establish were insufficient to preclude application of the statute of limitations under theories of fraudulent concealment or equitable estoppel.

Barefoot Architect , Inc. v. Sabo & Zahn, 2017 IL App (1st) 162616-U

(This is for informational purposes and is not legal advice.)

Abrahamson v. Greenberg Traurig, LLP, 2017 Il App (1st) 162226-U

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice claim on statute of limitations and statute of repose grounds.  It rejected the plaintiff’s argument that equitable estoppel and fraudulent concealment tolled the statutes.

Abrahamson v. Greenberg Traurig, LLP, 2017 Il App (1st) 162226-U

(This is for informational purposes and is not legal advice.)

Recent Illinois Case: Dobbins v. Zager

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In this unpublished order, the First District affirmed the dismissal of a legal malpractice claim on statute of repose grounds.   The court held that neither equitable estoppel nor fraudulent concealment saved the claim.  The court emphasized that misrepresentations that toll the statute of repose must be different from the representations that constitute the alleged malpractice.

Dobbins v. Zager, 2016 IL App (1st) 151175-U

(This is for informational purposes and is not legal advice.)

Recent Illinois Case: Pierce v. Vojta

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In this unpublished opinion, the First District affirmed the dismissal of a legal malpractice complaint on statute of limitations grounds.   The court also rejected plaintiff’s argument that her lawyers’ failure to inform her of her malpractice claim against them constituted fraudulent concealment.

Pierce v. Vojta, 2015 IL App (1st) 142510-U

(This is for informational purposes and is not legal advice.)

 

Recent Illinois Case: Beshkov v. Katten Muchin Rosenman LLP

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Legal malpractice claim was barred under the statute of limitations and the statute of repose.   The court held that, assuming that the defendant fraudulently concealed the claim, plaintiff’s claim was still barred because she had a reasonable amount of time (9 months) within which to file her action after she discovered it.   The court rejected arguments that the “reasonable time” exception to the fraudulent concealment statute had been rejected by the supreme court; that the court could not decide plaintiff’s discovery date as a matter of law; and that the court could not decide what was a reasonable time to file as a matter of law.

Beshkov v. Katten Muchin Rosenman LLP, 2015 IL App (1st) 142455-U

(This is for informational purposes and is not legal advice.)